Global debt jumped by $8 trillion in Q1, rising to record $247 trillion

The amount of debt held in the world rose by the largest margin in two years during the first quarter of 2018, growing by $8 trillion during the first three months of the year, the Institute of International Finance reported Tuesday.

Global debt has now risen to more than $247 trillion, which is 318% of the world’s gross domestic product. Additionally, IIF found that global debt has risen by $30 trillion since just the fourth quarter of 2016.

“The pace is indeed a cause for concern,” IIF’s Executive Managing Director Hung Tran told Yahoo Finance during a call with reporters. “The problem with the pace and speed is if you borrow or if you lend very quickly … the quality of the credit tends to suffer.”

Mixed denomination currency banknotes in a cash register at a Travelex store, operated by Apax Partners LLP, at City airport in London, U.K.. (Photographer: Simon Dawson)

That means more governments, businesses and individuals have been borrowing that could have trouble paying the money back.

“The quality of creditworthiness has declined sharply,” Tran added.

A chart from the Institute of International Finance shows the growth of debt in developed and emerging markets.

IIF also noted that global debt-to-GDP increased for the first time in more than a year with financial sector debt reaching an all-time high of around $61 trillion. Though the financial sector debt has been rising more slowly.

With global growth losing some momentum and becoming more divergent, and U.S. rates rising, the organization said that worries about credit risk are returning to the forefront, including in many developed economies, such as the United States and Western Europe.

While IIF analysts say the debt itself is not necessarily a concern because it can be rolled over and refinanced provided growth continues in issuing countries, they did stress that developments in the United States were worrisome for the global growth picture. In addition to increasing debt at a faster pace the country is also raising interest rates, causing the cost of borrowing to rise.

Sonja Gibbs, IIF’s senior director of the global capital markets department, noted that there was an increased risk of sovereign debt crises in a select few developed markets as a result of the increase of debt and financing costs.

“Government debt is higher than it was prior to the crisis and corporate debt as well,” Gibbs said. “This may be slightly overlooked.”

Gibbs added that the United States’ debt growth was particularly worrisome, given that it has now grown to more than 100% of GDP. With the increases in spending from President Donald Trump and Congress, the U.S. will now have funding needs of 25% of its GDP.

“The U.S. really stands out here because … a lot of that is the expanding budget deficit as well as maturing debt,” Gibbs said. “That’s a lot of financing need affecting the market.”